Prime Minister resigns – industry reaction

Prime Minister Keir Starmer has announced his resignation, with a new leader to be in place in September. Nominations for a contest for a new leader of his party will open in July with him remaining in post until the process is complete.

While Andy Burnham is widely seen as the frontrunner for the leadership, should multiple challengers emerge a contest will take place over the summer, with the aim of electing a new leader by the time MPs have returned from recess in September.

Responding to the announcement, Rain Newton-Smith, CBI Chief Executive, said “Prime Minister Sir Keir Starmer championed UK business at home and abroad and on both a personal and professional note, we are grateful for his service and all he has delivered for the UK.

“His leadership on the international stage is truly admirable, and we are grateful for all he has done to ensure the UK was open to the world. His steadfastness in doing the best for the UK with integrity and sincerity was plain to see in person.

“At a time when households and businesses remain under intense pressure from high costs, making economic growth the government’s central mission was the right call.

“With geopolitical tensions high, the country now needs stability, confidence and a clear path to growth. The UK’s economic challenges will not disappear with a change of prime minister. The economy won’t fix itself while politicians look inwards. And you cannot tackle the cost-of-living without addressing the cost of doing business.

“There are big decisions that need to be taken, whether that’s on the Defence Investment Plan, infrastructure projects, energy price caps or the UK-EU reset. These are long‑term commitments and businesses need to know that there is not going to be further drift or delay. Business will want their voice to be heard and for the needs of our economy, the ability to invest and create jobs throughout the UK, to be at the forefront of any decisions. It’s a competitive game to capture global investment and one in which the UK needs to stay ahead.

“We look forward to working with the government on the transition and with the next prime minister, who must move quickly to reassure businesses and investors, protect living standards, and set out a credible, deliverable plan for growth.”

Adam French, Head of Consumer Finance at Moneyfactscompare.co.uk, said “Money markets had already begun pricing in fresh political uncertainty after last week’s by-election results, with gilts and swap rates rising by around 10 basis points and holding at those levels. As a result, Sir Keir Starmer’s resignation has prompted a fairly muted response so far, with the effects already largely reflected in funding costs. 

“Episodes of political volatility tend to push up borrowing costs as investors demand a greater premium for perceived risk. Much will now depend on the fiscal policies put forward by future PM apparent Andy Burnham and anyone else vying for the Labour leadership, particularly their approach to taxation and public spending. 

“The lessons of the 2022 mini-Budget remain fresh. Fiscal headroom is tight and money markets will be watching the UK closely. If plans don’t add up, the subsequent loss of confidence can quickly drive up borrowing costs. Once again, it is households which risk picking up the tab if market confidence is undermined. 

“For those due to get a new mortgage later this year, there are steps they can take to reduce the risk of being caught out by rising rates. Many lenders allow borrowers to secure a new deal up to six months before their current mortgage ends, providing valuable protection should uncertainty push rates higher in the meantime. If rates do fall, borrowers can usually switch to a cheaper deal before completion without penalty.”